For a few years now I have been building water rockets out of soft-drink bottles.
For their simplicity these perform remarkably well. 
These pages detail my rocket setup.

Rocket Construction

Parachute Deployment

Launchers

Version 1 - the original

Version 2 - 'Launcher in-a-box'

Version 3 - 'Quick-Fill Launcher'

Extras

Launch Photos and Videos

There is also a lot of other information on the internet - just do a search for 'water rockets'.
One very good site is http://www.aircommandrockets.com

 www.isnotcrazy.com - the site for mad scientists